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How Technology Companies Can Protect Intellectual Property

Commercial & Corporate Law

updated:
2.1.22
Intellectual property law

When it comes to international company assets, you might think of real estate inventory and other tangible assets. The typical large company, however, carries most of its value in intangible rather than tangible assets. As such, there is no task more important for a company than to protect valuable intellectual property (IP).

Perhaps the most important form of IP is software source code. Don’t be deceived — these cryptic strings of digits represent an overwhelming percentage of the value of major Fortune 500 companies such as Microsoft and Oracle. For these companies, nothing is more important than the protection of IP rights.

What Is Software?

A computer program is a code that directs a computer to perform specific functions. The human-readable form of this code is called source code, while the machine-readable form is called object code. Source code (but not object code) is protected by common law copyright law and the U.S. Copyright Act.

Software, by contrast, is a computer program plus certain supporting elements, such as:

  • The operating system;
  • The ability to carry out certain specified tasks;
  • Documentation (user manuals, system administrator information, etc.);
  • Codes and data used by the program;
  • Development aids such as support programs, compilers, code libraries, toolsets, and APIs.

A software company needs to obtain IP protection for all of the preceding aspects of its software, not only its source code. Patent law and trade secret law can protect aspects of your software that copyright law does not protect.

Three Steps to Protect Your Source Code

Step 1: Establish Who Owns Your Code

Source code ownership depends on how copyright law applies to the creation of the code. It might seem simple at first — whoever wrote the code owns it, right? In real-life situations, it is rarely that simple. Two factors in particular often complicate the determination of ownership:

  • If you agree to create source code as a work for hire, it belongs to the party that hired you. The problem is that the terms of the work-for-hire agreement might be unclear.
  • A developer might incorporate open-source code under a license. Complying with the license terms can be confusing when you embed open-source code within your proprietary source code.

The assistance of a lawyer is often essential under the above-described circumstances.

Step 2: Legal Structures

Copyright law, patent law, and trade secrets are three IP legal structures that can protect your software.

Copyright law

Creators often use copyright law to protect software source code. Copyright protects the expression of an idea rather than an idea itself. The most basic form of copyright protection begins when you embed unique software code within any tangible medium. Even writing your code with a pencil is enough to trigger protection. For full protection, you need to register your copyright with the US Copyright Office. The Berne Convention protects international copyrights.

Patent law

You can also use patent law to protect your software. Unlike copyrights, patent law protects the underlying idea of a system rather than its expression. A patent protects the system that runs a software program, rather than the code itself. Software patents are difficult and expensive to obtain, and you must carefully word your patent application. International patent protection is also complex and costly. Patent protection endures for at least 20 years in the U.S.

Given the complexity of patent law, you need to hire a patent attorney before submitting a patent application to the United States Patent and Trademark Office (USPTO). You need a licensed patent lawyer.

Trade secret law

Trade secret law is another option for protecting your IP. One example of a successful trade secret is the formula for Coca-Cola. The problem with trade secret law is that a competitor can legally use your IP if they independently develop it. The main advantages of trade secrets are that they have no expiration date, and they protect materials that other IP legal structures don’t protect. To protect your international trade secrets, however, you must guard them carefully.  

Ultimately, you will probably need all three of the above-described legal devices to maximize the protection of your IP rights. Determining which legal device you use for which aspect of IP protection is where you need the assistance of an IP lawyer.

Keep in mind, however, that you cannot use a combination of trade secret law and patent law to protect a single item, because once you disclose the trade secret to the USPTO and are granted a patent, it is no longer a secret.

Step 3: Non-disclosure and Confidentiality Agreements

Non-disclosure and Confidentiality Agreements

IP law is public law, while contract law is private law. Both should be part of your IP protection arsenal. Non-disclosure agreements (NDAs) and confidentiality agreements are two weapons that you should include in your arsenal. These agreements are beneficial for supplementing trade secret protection.

There is no clear legal difference between an NDA and a confidentiality agreement. Both of these terms describe an agreement that prevents a non-disclosing party from using disclosed information in an unauthorized manner. You can sign an NDA with employees, contractors, or joint venture partners. Typical NDA terms include terms that:

  • Define the specific information that is confidential (typically source code);
  • Restrict the use of the information to specified purposes;
  • Prohibit disclosure of the disclosed information;
  • Prevent the transfer of disclosed information;
  • Mandate a “return or delete” policy upon the termination of the NDA;
  • Determine the governing law and the details of any necessary dispute resolution.

You should retain a lawyer to draft your NDA to avoid unintended consequences.

Other Tips for Protecting Your Source Code

In addition to the previous measures, there are other important ways of protecting the source code.

Document Everything

Keep a secure repository of designs, module architecture, code, email messages, and other relevant documentation. This evidence will make it much easier to win if you end up in court. You can even use it during settlement negotiations.

Vet Your Partners

Conduct thorough background checks on job applicants, developers, and your outsourcing company. IP is a precious resource, and you should always investigate the people you would grant access to it.

Conclusion

The survival of your business is likely to depend on your company’s IP protection efforts. These efforts are complex, and they depend on arcane aspects of U.S. and international IP law. People will be trying to steal your IP, and it is very easy to steal from a company that lacks a sophisticated IP protection plan.

You need to weigh various factors to construct a comprehensive plan to protect your company’s IP rights. The assistance of an IP lawyer is essential. For a free consultation, contact Sequoia Legal by calling (303) 476-2851 or by filling out our online contact form. Although we assist in the filing of copyrights and trademarks, we are not patent lawyers.

Hunter Boone

Hunter has been a part of the Sequoia Legal team since 2017.  Hunter specializes in general corporate matters, healthcare compliance, international trade laws, and anti-kickback regulations.

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